The Twenty Minute VCNiklas Östberg, Founder @ Delivery Hero: Competing with Uber and Doordash in a Capital Arms Race
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130 min read · 26,318 words- 0:00 – 15:00
If you take our…
- NÖNiklas Östberg
If you take our Thailand business, we scaled from couple of thousand orders a day up to 400,000 orders a day in less than a year. But it was not sustainable.
- HSHarry Stebbings
Niklas Rosberg, the CEO and co-founder of Delivery Hero, the largest delivery platform in the world.
- NÖNiklas Östberg
We thought that we were unbeatable, unstoppable. Therefore, we felt there was a clear path to being a $100 billion company, so why would we have wanted to dilute on $30 billion? We got greedy. Stock fell 5%, then 10 or 15%, and then shortly after more than 50%. Then it was truly too late. Great leaders follow their beliefs. When they do, people follow them. What public market often does is that it values things one or two year forward. And of course, it compares with other companies. We were definitely overvalued, and we are probably undervalued today.
- HSHarry Stebbings
Do you see DoorDash and Uber Eats as your biggest competitors today? Ready to go? (instrumental music) Niklas, this is such a joy for me to do. I mean, when we look at Delivery Hero today, it is one of the generational defining companies of Europe. So thank you so much for joining me today.
- NÖNiklas Östberg
Ah, thank you very much. Very kind of you.
- HSHarry Stebbings
Now, I heard from some of your friends that you are the most resilient person they've ever met, and I heard stories of spraining ankles and cycling 100 kilometers the next day. I think that a lot goes back to our earlier years. Where do you get this unwavering determination and resilience from, do you think?
- NÖNiklas Östberg
I think some of it comes back to my, my childhood. I was a cross-country skier. Uh, and for anyone who's not a cross-country skier, it's, it's exhausting. You, you, you train every day. You go out in the dark, two hours interval training in the dark forest of Sweden. That's kind of how a regular day looked like, and I think you build some resilience there. Uh, it's, it's... So I think that came from there. But I think the other thing that also builds resilience is if you feel like you have a purpose and you actually do something where you add value. Um, and I think over the years, I've also learned to focus on what I can impact rather than all the other things. And I, I know that is hard. But I, I really tried to stop caring for what other people think or pleasing others. Uh, so that helps. And then I would say, yeah, having a team around that, that is supportive, um, that, that also helps a lot. But, but it probably comes down to those things. But the skiing definitely makes a difference.
- HSHarry Stebbings
Can I ask? One of my biggest weaknesses is I care far too much about what other people think. Does success help in terms of reducing the importance of others' opinions?
- NÖNiklas Östberg
It probably builds a certain confidence that what you're doing i-i-is right, t-that you got something right. It probably also helped that, uh, when you have success, you also get a lot of positive rea- uh, uh, kind of encouragement or people being supportive, and they're... They celebrate success. It's also very easy to, to... And you have to be careful that you don't... that it doesn't, uh, take you off your... I mean, your feet off the ground. Um, but, but I do think that some level of success is probably helpful as well.
- HSHarry Stebbings
Was there ever a time when your feet did get off the ground? Or, y- you know, we call it getting too big a head. I remember when I was, like, 21-
- NÖNiklas Östberg
(laughs)
- HSHarry Stebbings
... and I raised my first fund. I thought I was hot shit. And Niklas, I was not hot shit. (laughs) Did you ever have a time, and how did that go?
- NÖNiklas Östberg
Oh, yeah, probably also had many times. I, I remember back in the 99s, I was investing in stock market. I thought I was amazing. Uh, I, I made a lot of money. I, I, I lost it very quickly and realized that maybe I'm not that great after all. Uh, I think I had it also in, in business. I think we all thought that we were better than, than we are, we were, uh, back in, in the COVID pandemic. Business was going through the roof, um, probably also time the result that we were better than we actually were. Uh, so I think y- you constantly get reminders that maybe you have to, like, stay on the ground. You're, you're, you're, you're not as good as you think you are in the good times and probably not as bad as you think in the bad times. So, yeah. Yeah, yeah, I had many times.
- HSHarry Stebbings
What did you do in COVID that you wish you hadn't done?
- NÖNiklas Östberg
It's, it's hard to say. Of course, it's easy to say with benefit of hindsight because it was not only that COVID ended. It was also, uh, that the whole capital market and, and the interest rate and many other things that happened, uh, when COVID died out, uh, that all came together at one point. And, and that, of course, put a lot of pressure into companies to cut costs and so on. If we would have known that, we would have cut cost faster, earlier. We would have probably taken down risk a little bit. We would have saved as much money as we can. Probably would have raised equity, uh, instead of debt, uh, during the time when we thought that we should be worth hundreds of billions, and, and we felt we were undervalued back then when we were at 35. Uh, so of course, it would have helped if we had taken on equity instead of debt.
- HSHarry Stebbings
Can I ask on that? Not... Raising debt is not something that's spoken about a lot, but a lot do it. What's your biggest lessons or advice on, on raising debt and using debt as an instrument instead of equity?
- NÖNiklas Östberg
Yeah, I think the, the l- the learning for me is that you have to be careful with it. Uh, coming back to the point before, we thought that we were unbeatable, unstoppable, um, and therefore felt there was a clear path to being a $100 billion company. So why would we have wanted to dilute on $30 billion? We got greedy and, and didn't want to dilute those couple of percentages that would have cost us to raise a billion or two. And we were about to do it, but then stock fell 5% and we felt, w- well, now it's too late. Then the stock dropped another 10 or 15% and we felt now it's definitely too late. And then shortly after, the stock fell more than 50%, and, and then it was truly too late. Uh, so, so I think it's easy to get greedy in those times. You feel like you're on top of it. And yeah, you have to be careful. It's, it's better to dilute and not, not think too much about it.
- HSHarry Stebbings
How do you maintain morale when you have stock drops as you did?
- NÖNiklas Östberg
I think it wasn't that hard in the beginning because I think everyone thought that it was just temporarily, and it would come back, and all the numbers, all KPIs were good. Um, I think we took fairly fast action as well, eh, back in end of 2021, we, we, we felt a little bit worried about the market. We shut down Germany and, and Japan. Uh, we, we cut down $100 million, $200 million out of our budget before the year even started. Um, so we, we actually came in and I think things crashed down in January, February, March, so a few months later, eh, after we did that. So, I'm, I'm lucky we did that. But I think the morale of the company was not... still very good. They felt it was temporary. They felt they had taken the action we should have taken already before, uh, ahead of time. I think the hard part was, um, to not grow valuation for another three years, and we're almost where we were, I don't know, three years ago if you look at our stock today. And I think at some point, some people start to lose hope.
- HSHarry Stebbings
Were you overpriced three years ago or underpriced today?
- NÖNiklas Östberg
I think depends how you see it. I think what public market often, uh, I don't know, what it, what it does is that it, it values things one or two or forward. And of course, it compares with other companies. And I think, yeah, we were definitely overvalued if you just look at it from a couple of years down the line and fast-forward. I think if... for anyone who rather think of it as a DCF cost of capital over X number of years, maybe we were not that overvalued back then, and we're probably undervalued today. Um, maybe truth is, is a little in between. Um, I, I, I definitely think that we're undervalued today though.
- HSHarry Stebbings
We mentioned confidence and having the courage of convictions. I, I, I do wanna talk about something you said to me before, which is, "Daring to be contrarian, making decisions not everyone believes in." Can you talk to me, how do you think about this specifically with regards to your leadership?
- NÖNiklas Östberg
I think great leaders, uh, they follow their beliefs. And when they do, people follow them. And, and I think that, that also means that they will be contrary. There will be occasions when they go against the stream. And if they have a good judgment, and great leaders have good judgments, then they're usually coming out very strong afterwards. Uh, and every time they succeed, they, they will build the follow base and trust. And I think it's very dangerous when leaders don't follow their belief. Uh, I think it, it drives skepticism in an organization. I think, uh, it, it usually will not be getting the respect. It will be inconsistent. Their leadership will not be consistent when they don't do what they think and what they believe in. Uh, so I do think that great leaders have to follow their, their instinct and their belief even if they are sometimes contrarian views.
- HSHarry Stebbings
When did you have the strongest belief that most people disagreed with you on?
- NÖNiklas Östberg
I think there are a lot of smaller things that could be anything around hiring, could be anything around, uh, certain small investments. But I think a few that comes to mind as big, uh, differences was around logistics. No one believed in logistics back then. Uh, this was back in 2015. And we doubled down on logistics. The first initiative we did, we lost six million. It, it looked terrible. And most people have probably given up there, but we, we shut down that company and rebuilt it again, and invested tens and hundreds of million in logistics. And I think everyone say now that that is a better customer experience. It's, it's clearly better for customers and, and, and had a strong belief that we just have to figure out how to make the economics to work. I think the same, selling our home market was, was clearly a contrarian decision. Maybe some investors thought it was okay, but I think in the company, there was uh, uh, a very contrarian view to sell your home market. But I think that, that made us incredibly strong.
- HSHarry Stebbings
Why did you sell your home market? It's a massive market in terms of population. It's not got the volatility that emerging markets do have. It, it seems from the outset bluntly a very contrarian decision.
- NÖNiklas Östberg
Kinda back then, so this was 2017, and, uh, yeah, I felt that the market is not as big as it, as it looks. Um, it has a strong competitor there. And there will be no way of consolidate that market later on given regulation around M&A and so on. So I think I thought this is gonna be value maximizing, and then I, I did believe that we could use that money to actually double down in markets which I consider to be much larger, and I think they turned out to be larger markets outside of Germany. I also believed in a different thing, which is I felt we will be a stronger operator internationally if you're not getting distracted by our home market. Because back then, everything we did, as soon as something happen in Germany, we will drop the ball on everything else because it's so close to our heart, uh, where we sit. Uh, so I felt we were very mediocre executor outside of our home market because of that. And once we sold Germany, there was no excuse for not delivering outside of like in the rest of the world. So I think we became much stronger in our execution operations, uh, outside of Germany once we sold Germany.
- HSHarry Stebbings
It's so interesting you said that you didn't see a market where consolidation could happen. One of my biggest questions when investing today is, bluntly, is this a winner take all market, and what does the distribution of gains look like in an eventual outcome in this market? Is this a market where you have to see consolidation as the ultimate outcome?
- NÖNiklas Östberg
No, I, uh, I, I don't think it's a winner-takes-all market. I, I probably changed my view there. Uh, proven wrong, uh, frankly. I don't know if you've seen US, that there are two players making a lot of money. Look at UK, there are three players making a lot of money, all of them. France, two player making good money.
- HSHarry Stebbings
When you say that, like, I don't mean to jump in, but the UK, who have you got? You've got Deliveroo, you've got Uber Eats, and-
- 15:00 – 30:00
What else have you…
- NÖNiklas Östberg
large, customers stay incredibly loyal to your product. They, they are not as price-sensitive as people think. Uh, so we don't see that customers move because they get a five euro voucher somewhere or ten euro voucher. They might do it one order, but then they go back to where they usually order, and what is top of mind for them. Therefore, I, I, I do think there is a strong lock-in on customers as long as you deliver a good service. The day you don't deliver a good service, yeah, well, then they can, it can be disrupted fast, and we have been, disrupted a lot of companies. I mean, Spain, Italy, Poland, Norway, we entered as the number two or number three, number four player in those markets, and by now, the largest. The, there are occasions when the, the, the leader's not delivering good quality, but if they do, it's incredibly hard to gain the customer base of someone else. So, I think there is important in the early stage that you get a strong lead. Uh, but then once you get scale, it doesn't really matter if someone else also has scale. It's not that if a competitor is half our size or double our size, doesn't make us smaller. It- it doesn't make our economics worse if they are bigger or smaller. So it's more relevant that we have scale, uh, and that we deliver a good service. And I think in the past, I saw it more as 80% competition, 20% our own execution. I think what I've learned over the years is 80% our own execution that is gonna matter for how big we get and how much money we make, and, and maybe 20% driven by competition. It's, it's not vice versa. So yeah, as long as you get scale, you will make money regardless if you're number two or number one. Um, of course, if you're number two, you will have less scale, you will make less money, but, uh, you will still be able to make money.
- HSHarry Stebbings
What else have you changed your mind on significantly where you did or didn't believe something that, over time, you have shifted your opinion on?
- NÖNiklas Östberg
Probably many things. I don't know. It's, it's, uh, uh, it's just a constant, uh, learning progress, like how you evaluate, uh, people, what is the, the key driver for the business? I think one thing that I, I realized over time is, is the importance of simplicity. Um, I, I think in the past, there was a tendency I wanted to do more than what the organization can actually handle. And I think focus on a few things and, and, and really doubling down on those makes a world of difference. So complexity is a killer of, of, of, of speed.
- HSHarry Stebbings
I mean, that's such an interesting lesson because I always hear the statement that the best CEOs are the best resource allocators. And simplicity kind of boils into that. Do you agree with this statement that the best CEOs are the best resource allocators? And what have been your best lessons or most poignant lessons on resource allocation as a CEO?
- NÖNiklas Östberg
I, I do agree that the best CEOs are, are exceptionally good capital allocators. I, but I don't think it's the most important part of a CEO's job. I, I think it is an important job, but, but by far not the most important. I think more important is that they drive the culture, they drive the speed of the organization, you drive the organization in direction of, of, yeah, pace and data and, and direction.And if you do that right, capital allocation will be very easy. And, um, and, and capital allocation is also decision every day type of topic. Most decision capital allocation could be, should we invest more in this product, should we invest more in this area, should we invest more in this country? And if you have good data, and if you have good culture, um, it will be obvious what is the right investments. You just have to look at the returns and so on. So I think that's probably more important that you, you drive the organization, the speed of organization and the culture of it is more important than allocation itself. Then of course there comes times when there are big decision where you actually have to make a bet. You don't have the data, you don't have the information, and you just have to make a bet that we're going to go in this direction or that direction. And, and I guess that's what good CEOs have a good feeling. They know their industry. They know their organization. They know the strength of the organization. And they will dare to make sometimes the bold decision. It could be doubling down. It could be shut down. It could be new product line.
- HSHarry Stebbings
When you think about those bold decision moments, when you're sitting there and you know it's one of those moments, can you take me to a time where you got the decision wrong?
- NÖNiklas Östberg
I think, yeah, quick commerce is an interesting space. I think we have been exceptionally happy with the performance of how we have been able to scale the whole quick commerce, uh, side. And that was also contrarian belief, uh, to double down on this. It was not a very popular one. But we felt that if you want to build what the customers really want and what they're asking and demanding, then we have to be able to deliver groceries and other items in a short fashion. And I think right now, that's a big part of our business and, uh, long term is going to be more than 50% of our business, so larger than food, uh, for sure. So that was... I don't know, that, that turned out to be right bet. At the same time, we also did a bet in a company called Gorillas because we felt we cannot do quick commerce ourselves in every geography. We can't afford it. It's too expensive, uh, to build up. So we, we rather felt let's take some of the money, put it in another company and see how we can learn and see how, how they can succeed and potentially, uh, uh, I don't know, certain opportunities in, in the future. Unfortunately, the, the, the business model probably could have worked out and not for Gorillas, but the challenge is that the market changed and it was not possible to raise capital anymore for these companies, and they burnt too much, so.
- HSHarry Stebbings
How much money did you put in them? What did you learn from that going south?
- NÖNiklas Östberg
Yeah. We, we put in close to $200 million. Uh, we got some of it back, a small portion back. Um, but yeah, it was most of that was, was lost. I think the big learning I've made there as well as a few occasions before, in the end when you look at cohorts, user acquisitions, and, and the data in, in, in depth, you... it's almost like gravity. It, it, it always works. It's, it's... it always works. But for some reason, they kept acquiring more customers than I thought every month. They kept cohorts coming up every month, and therefore also growth coming up faster than I expected. So when I looked at a few months earlier, I felt, "This makes no sense. They will never make it." And then they outpaced the expectation I had, and I felt that, ah, maybe I was wrong and... but, but now it's too late. And then they... it happened again and again and the next month and next month. And at some point I felt maybe I'm wrong. Maybe my models don't work. Maybe the data... somehow it, it, it, it seems to work because I've been wrong so many times now that... and then maybe I'm just wrong and I, I, I... and that's when we made the investment. In the end it is, as I said, it's almost like gravity. In the end, cohorts model work, acquisition models work, prediction there works. Temporarily you can boost it for vouchers, discount and other means, but in the end it's, it's... y- you have to look at the core of the business and, and see. And, and I've, I've done that mistake many times, um, where also some markets, some... I don't know. We have a market in Asia where they beat their plan every month, and at some point I, I realized like may- maybe I'm not a good forecaster. Maybe I'm just wrong. Maybe they are right and... but then it turned out it was built on, on, on a little bit light foundation and eventually what comes up needs to come down. I've, I've seen the other way around. Sometimes you, you keep investing, you feel like everything is right, but the business doesn't grow and you feel like maybe, maybe I'm just wrong. But eventually that tailwind that you're building in is eventually kicking off. So I, I, I think the learning there is to, to stick to what you believe or stick to your... to, to your core principle on investing, stick to your core belief in what works and what doesn't work, and don't get too, uh, get too excited by, by the, the, the outside environment and, and kind of, um, getting dragged into something that, that kind of goes against what you believe in truly.
- HSHarry Stebbings
I, I always think back to John Maynard Keynes, the economist who said, "When the facts change, I change my mind." And I very often think about bluntly how long do you keep pushing on a belief where all of the data tells you otherwise? That is a very hard question.
- NÖNiklas Östberg
Yeah. And, and probably shouldn't. (laughs)
- HSHarry Stebbings
(laughs)
- NÖNiklas Östberg
And of course you have a lot of momentum traders and, and they make a lot of money by just staying with the momentum. So if you're not part of that, that momentum, you're also gonna lose out. So of, of course there are occasions when you also have to play along. When the music is there, you, you, you dance, but, uh, you, you gotta be careful.
- HSHarry Stebbings
You mentioned that investing in Gorillas is, is a lesson. You know, I, I spoke to so many of our friends who said, "Literally Niklas is the master of M&A." When you say about investing in Gorillas, that's the extent needed 200 million, it's a lot. How do you think about that buy versus build given your incredibly effective M&A strategy as well?
- NÖNiklas Östberg
Yeah, so- so- and of course coming back to this 200 million mistake also down here, that we were a 35 billion company. So, this was back then less than a percent. It was a half a percent of our market cap that we felt like we are willing to take this bet on this. Of course, if that valuation falls from around 35 billion to- to 5 or 10 billion, then of course losing 200 million is a lot, especially if you don't have the cash in the balance, or have enough cash in the balance sheet. So, I think that is also part of the learning, that you- you have to- you have to take yourself a little bit out of this, uh, speed mode, uh, and- and- and- and think it through on- on- on a more fundamental basis than- than getting too caught up with your current value or your current growth.
- HSHarry Stebbings
Well let- let's just stick on that, sorry, before we do the buy versus build. You mentioned take yourself out of that speed mode. We chatted before and you said speed of execution is the only thing that matters. How do you think about balancing speed of execution is the only thing that matters with having the- the kind of, uh, wisdom to remove yourself from the day-to-day speed mode for those decisions?
- NÖNiklas Östberg
Mm, s- so I do think for an organization itself, speed is really what matters. And- but the good part is that for most organization and most decisions are revertible. So, you move, you take a decision, you- you get data, and you change direction. And the faster you can iterate and do that, the faster organizations can move. In the end, the reason for saying that that's the only thing that matters is that all the speed and all the things that you're building towards customers or other things that are priorities is- is compounding. So, if you can get 25% more of your organization in a year, that feels like, yeah, that's good, but it's- it's not game changing. If you do that for 10 years y- y- you're effectively compounding up a 10 times better product. So- so I believe in this moving fast and- and- and driving an organization fast, and- and- and- and kind of compounding that, uh, is- is key. Then there are of course those non-reversible doors, uh, where you have to be very careful that you think it through and so on. And- and I guess making large investments is kind of a- a non-reversible, um, process. I think you- you- you have to be a little bit more cautious there.
- HSHarry Stebbings
How do you retain speed at scale? Delivery Hero is a monster of a business with a huge team. How do you make sure that, bluntly, everyone in the org feels urgency and there is not, bluntly, a little bit of European apathy and slowness?
- NÖNiklas Östberg
I think you have to divide the org and responsibility and ownership very carefully, and making sure that everyone can see their impact very clearly. So- so- so for example, s- so the- the setup we have, for example, we make sure that there's a clear ownership on a country level and making sure that they have that autonomy and that ownership, um, so for them they can really make an impact in that country. It's very tangible what they do and outcome. If we set the goal of driving overall business to a size, then each individual cannot make really that impact and cannot be that visible in what they do. So, you have to find a way that you can actually divide the goals in a way that is clearly measurable what you do, and every part of the organization, every person in that organization, and making sure that you drive that accountability and visibility and clarity. And if you do that, I think it's- it's very easy to manage the organization. Uh, it- it- it- it's very clear who's a strong performer and who's not if goals are very tightly aligned to what the- the people actually do, and the organization is set up such that you have that accountability and responsibility on a smaller basis, in smaller buckets. And I think that comes then back also into the whole culture, the culture of actually driving an impact. And I think that what you see in many companies over time is that they- they get too big, they get... the goals are too large, it's not divided in, it's very intransparent what everyone does and how they contribute to their goals, and they start getting inwards-looking. They- they don't look at what the actual output that they're driving, they rather look at how much they worth and what they deliver. But it can be for, not for consumer or customers, but for, I don't know, maintaining the organization or... S- so I think building a culture where the output really matters and making sure that you divide the organization such that they have ownership and accountability on a very low level.
- HSHarry Stebbings
What's your most unconventional management belief? I- I love this question because people come up with like, "Hey, one-to-one's are bullshit. I don't believe in them." "All hands are rubbish." Um, "Remote work doesn't work." What's your strongest management belief that is maybe less conventional?
- NÖNiklas Östberg
I- I- I think most of the beliefs I have are fairly conventional. Uh, I don't know. I- I- I don't think there is anything that stands out. But I- I- may- maybe one thing is that y- y- you've got to find your own way of running the company, and there are many ways to run a successful company. And if you look at the best CEOs, there's a huge difference between, uh, a Steve
- 30:00 – 45:00
When have you felt…
- NÖNiklas Östberg
Jobs, um, a- a- a Warren Buffett or a, uh, Bill Gates or a Steve Ballmer, and- and- and so, yeah, they- they all have different styles, different philosophies. I think what is more relevant is that you're authentic in what you do and you leverage what you're good at. So, if you're very good at- at pushing hard and- and- and driving hard, well, then you should leverage down on pushing hard and- and get into deep... If you are more a visionary you should leverage that you're a big visionary and then hire team members who can drive your org and- and do the other part. But I think, yes, I think you have to build... th- th- you have to double down on what you're good at, um, and you have to be authentic in what you do.
- HSHarry Stebbings
When have you felt most inauthentic in your leadership, and what caused that realization that it was not who you are?
- NÖNiklas Östberg
I think had in the early days, uh, uh, I, I, I was, I was still young and the organization got very large, very fast. Um, I probably had a view that I, I was too young for being CEO, I didn't have the experience, the wisdom of being a CEO of that size. Probably felt I had to be something I'm not. Uh, so I, I probably at some point in those early days kind of pretended to know more than I knew, uh, pretended to be someone I'm, I'm, I'm potentially not. And I think it was a little bit of a aha moment, uh, the day that I, I, I somehow gave up on that, and I, I was, "Here are my weaknesses, here are my strength. Take it or leave it. That's who I am." And, and somehow it's met with such a positive response. And, and yeah, I, I, I felt once I start getting authentic that the followership then, they grew way larger. Um, so, and I realized the weaknesses were maybe not that big after all because can always be compensated with someone else having that as a strength. So I think, I think, uh, for me it was, uh, the day I realized that an authenticity is, is, is a core for, for, for leadership. This was probably one of those moments.
- HSHarry Stebbings
I think it's the same with investing. I thought for a long time there was a right way to be an investor, and then you realize there's no right way. There's just kind of your way and to lean into your strengths in that respect. (laughs) We, we mentioned the buy versus build earlier. I do want to go back to that. As the master of M&A, how many acquisitions have you made, Niklas?
- NÖNiklas Östberg
I don't know. There's been a lot, but I think it's over this-
- HSHarry Stebbings
It's like over 35, over 35 though.
- NÖNiklas Östberg
Yes. But I think a little bit misconceptu... Yes, we have done a lot, but most of them have been very, very small. And what we believed in is that we believe in those local entrepreneurs who knows the market better than anyone, and we can leverage the fact that we know how to scale things and we know how to measure things and we know how to get good returns. So if I give ex- some of the examples, uh, PedidosYa was acquired when the company did 60,000 orders per month, and, and today it does maybe 20 million orders per month, uh, or close to at least. So, um, so, so of course with very small businesses back then. Or Talabat. Uh, I don't know you know Talabat, it's a-
- HSHarry Stebbings
They, they are huge.
- NÖNiklas Östberg
... classifying billing company. And back then I think they did 70,000 orders per month, so it's literally nothing. But we were good at, at leveraging what we were good at, which automate, drive efficiency, knowing how to invest, taking over, building on scaling that while we felt that we had a big benefit of having those local entrepreneurs and, and, and that we can plug into. And, and I think that has been a big success of Delivery Hero. But we, we rarely made big M&A. There has been one or two big M&A, like Global, but most M&A have, have been rather small and, and rather being like you're acquiring a team, um, and you require yourself one year of head start, and, and double down on that.
- HSHarry Stebbings
Is it- is it easier to buy a company versus build a company?
- NÖNiklas Östberg
I think for most companies it's harder to buy a company and be successful there. Uh, I think the, the hard part is not buying a company. The hard part is to make, make something good out of that company. And I think that that's probably something Delivery Hero has been very good at. They've been good at fostering this entrepreneurship and getting them on board. Um, and, and that's probably a success.
- HSHarry Stebbings
We're gonna get to how you retain entrepreneurs in a way that no one else manages to do. I just want to stick on the pre-buy process. Do you always like to invest first or will you buy straight? What's the preference?
- NÖNiklas Östberg
I think in the past we knew that we had to build scale very fast, uh, probably wrongly so. We, we, we, we, we looked at Just Eat back then. It was this huge company when we started. It had been operating for 10, 15 years. We had another company called Takeaway that is now one company, Just Eat Takeaway, but that, that was the gorilla back then and we felt we will not stand a chance unless we scale fast. In order to scale fast, we just have to buy and we have to build, and we have to do that in, in, in aggregate. I think over times the industry changed, logistic came, Uber and others entered the market and proved that it can start this business way later than we did. But, but we believe that the only way to build scale fast enough was to buy back then. I think if you look at things right now, we probably prefer to build. Um, the, the main logic for that is buying something now will be, well, at the time, will be extraordinarily expensive given that, that, uh, we, we, we still consider Delivery Hero to be undervalued. Um, but also even if you buy ourselves another 3, 4, 5% business in size, if that distract us with 2, 3, 4%, then effectively didn't achieve anything and we only spend money on it. So in order for us to buy, it really needs to be something where we feel here we have a very strong team and we can plug it into a, a machine and it will make rest of Delivery Hero better too.
- HSHarry Stebbings
To what extent do you let the attitudes of the street public market investors impact your buying mindset? When you're looking at an asset like Global, for example, I'm not picking on them, I'm just choosing it as a well-known asset that we got introduced through. You know, the public market may love it or they may hate it, I'm, I'm not sure, but they will have a feeling. To what extent do you let that permeate into your buying mindset?
- NÖNiklas Östberg
Think of your investors with a long-term mindset and, and don't get too hung up on the short term. Of course there are occasions when, when, yeah, we- we- we have to think it through, I don't know, very carefully and not making a mistake.But I think overall, I think we, we can see the cohorts, we can see the acquisition where we can see the customer experience, we can see all the data in the world to know if this is a good acquisition or not. We can take Global as an example. It was very clear for us from the very first day that this would be a unbelievably profitable company.
- HSHarry Stebbings
Why was that clear for you from the first day? Respectfully. It is a expensive business to run. It's a tough business. We both know (laughs) these businesses well. I- it's not obvious to everyone. Why was it obvious to you?
- NÖNiklas Östberg
For us, we, we, it is very simple. And we, we, we, as I said, we, we see the cohorts. We see like h- what is the repeat rate of our customers, and then how many customers are required per month and how is that d- d... Yes, how do the existing base evolve over time, and how many do we add to that? And that, that would very clearly give you a certain growth trajectory, uh, from there.
- HSHarry Stebbings
Does that not assume that cohorts are, uh, identical? And what I mean by that is, as you expand cohorts, you will get less and less close to your ideal customer profile. They will be further away from your target market, as naturally happens with customers. And so the cohorts may behave differently. How... Do you see what I mean?
- NÖNiklas Östberg
Yeah. I, I, I do. But, but the benefit we have here is that we, we, we're also owner of assets in, in Delivery Hero with, with more than 20 years of, of cohort development, where we have enormous amount of predictability for 70 different markets. So, and we have seen in every single market, not an, not a single exception where it has deviated over time.
- HSHarry Stebbings
What are the big lessons? I'm so sorry to interrupt you, Niklas. What are those big lessons from those cohort data behavioral trends?
- NÖNiklas Östberg
Cohorts are incredibly strong. They don't change. If anything, they get better, with the only one exception when you screw up, when you start not looking at the customers, or when you start missing a trend. So I, I mentioned logistics. So we've done a couple of mistakes, but we're not fast enough with our logistic implementing our own delivery fleet, and then someone else comes, then of course our cohort will deteriorate. Um, or m- multi-vertical. We have built out a very good multi-vertical offering to give further value to our customers. But, but we didn't do that fast enough in, in Colombia, as a good example, and we get disrupted by Rappi. So then the cohorts deteriorated, uh, big time. Or if we acquired a lot of customer based on vouchers, discounts, promotions, then of course we also see a deterioration in cohort, uh, once we start pulling that other system. But if you look at, at, uh, where we operate, um, and, and where we do things right, and where we care for the customers, and where the, the cohorts are str- the strength of the cohorts are not coming from, from vouchers and discounts, we, we have enormous amount of predictability. So if you take the example of Global, it was very easy for us to see how this business is gonna grow over the next 10 years. Uh, and we are only, uh, a couple of years down the line here. So, we still have many, many years of that growth trajectory. And we know how much margin we're going to make in an order. That's also very predictable for us because we set the price. So in the end, we know that the, the, the, the margin on the, the business is gonna grow to 10, 10 to 13% over time. So based on that, you can very quickly calculate your gross profit and you know your base cost, the marketing, as well as the, the overhead that you have to have in order to run a certain size organization. So if you take Global, it's incredibly easy to see how profitable that business is gonna be over the next 10 years. And for us, it was therefore clearly a good acquisition. For an investor, they don't see that data. The only thing they see is what is the top line and what is the bottom line, and what the growth rate is. And of course, when we acquired Global, that was a bad timing probably, it was end of 2021, um, um, before the whole market collapsed, where everything is about profitability, and Global m- we lost, uh, 330 million, uh, when we acquired it. Uh, so of course, adding another negative 330 million getting into 2022 was not a, a, was not very pleasant. Uh, so, so, but, but in the end, that was painful. But I think everyone start realizing how much value Global is gonna be worth and, and how much it already is worth, uh, if you extrapolate where we stand now.
- HSHarry Stebbings
Do you think 2 billion was the right price?
- NÖNiklas Östberg
Well, we paid with stock. So in the end, I think effectively, since our stock fell with 75%, that, and we, we, we, we didn't dilute that much. Uh, so we bought it when our deli- Delivery Hero was more like 30 billion. So the dilution for Delivery Hero was more like 5, 6% maybe, um, in that order of magnitude. Um, so I think, I think that was an incredible acquisition, only diluting, uh, a, a few percent less than 10% for a business that is, is, uh, clearly gonna outgrow the rest of the business.
- HSHarry Stebbings
When you look at cohorts, what is it that excites you? Is it like... 'Cause you could have like AOV size, average order value size, being super high. You know, twice a month I spend a lot of money. Or it could be I use it every single day, but for very small things. What is it in the cohort data that you've learned shows true cohort strength?
- NÖNiklas Östberg
In, in the end, you, you, you want to cater for customers being able to order as often as possible and as convenient as possible. If you set the basket, the minimum basket size, such that you need to have two s every time you order, well, that would take away a lot of occasions for you because sometimes you're alone or, or you, you cannot afford. So we have to find ways how can we drive economics also for small baskets and make that work. However, if you do something that is not long-term sustainable-... then, then of course the cohort's also not gonna be sustainable because the day I then, I don't know, move you from being able to do a €5 order, and that's not economical obviously today, and suddenly you can only order if you order for €15, then you will start reducing your order behavior and therefore the cohort's not sustainable. So whatever we do, and the, the, we, we always have to build on sustainable economics that, that even if it's in, in the first instant, we might not have managed the business to get economics. So for example, with logistic, it took a couple of years before we were broke even per order basis, uh, in, in, in logistic. Same with Dmart and, and the whole, uh, Quickommerce. It took us a couple of years to be break even-
- HSHarry Stebbings
Yeah.
- NÖNiklas Östberg
... per order basis. But we didn't, it was not because we charged too little, it was just because we haven't optimized our own efficiencies. Therefore, you, you can maybe be ahead of time in terms of what you offer to the consumer, but you have to find a clear path how you long term can make sustainable, otherwise they should never offer you to, to do that order.
- HSHarry Stebbings
Speaking of long-term sustainable, what do you do, you mentioned Rappi in Colombia there, what do you do when you have competitors who suddenly raise or have a lot of money and that could impact your cohorts?
- NÖNiklas Östberg
It doesn't impact our cohort so much, and often the impact on, on the business and maybe profitability is rather that you, you get nervous and you start spending a lot of money and you start copying what they do. But, uh, our learning is that as long as we keep delivering good experience for our customers, um, we keep pushing the boundaries for how we can make, I don't know, economics on every single order, if someone is willing to make a loss per order, uh, without that, that trajectory for getting profits, they might get some of the discount hunters, and, and hunters and, and, and the, the low value customer base might go to that competitor,
- 45:00 – 1:00:00
You mentioned the word…
- NÖNiklas Östberg
but it, but it's not sustainable. So eventually they will have to take away those vouchers, those discounts, and those customers will go to any platform then. So I think the core is to making sure that we, we have a service where our good customers are loyal and, and that's what we see. Regardless what someone invests, we see that our customers are, are, are exceptionally loyal.
- HSHarry Stebbings
You mentioned the word good there. It made me think, you know, we ha- saw this bubble of capital going into the space whenever it was, two to four years ago now. M- when you get to my age, Niklas, the memory goes. Uh, but my question to you is, was that a good bubble ultimately that did produce advancements in logistics, consumer education, consumer awareness? Or was it a bad bubble that bluntly burnt a lot of investor money and didn't really progress the space forward?
- NÖNiklas Östberg
I don't think it moved industry forward that much. I, I, I think it just drove some non-sustainable behavior. And same here. If you look at the cohorts, uh, we clearly saw a bump in the cohort up. We thought that we would maybe maintain it at that bump, that higher level, but it turned out it went back to the trend line. So if you have a trend line of this, it went up temporarily, but then it went back to trend line. So it, it really didn't move much in the industry. It just created a little bit of a bubble where we, we, we, we, we spent unnecessary money. So I think effectively in the end, COVID was not a good thing for us.
- HSHarry Stebbings
Can I ask, going back to the M&A side, you have an unbelievable ability to retain founders like Oskar, incredible founder, we both agree, where no one else does. We both know M&A. You do your earn-out and then you sod off as quickly as possible. They stay with you. How do you keep founders so effectively?
- NÖNiklas Östberg
Um, I, I know how they think. I'm a founder myself. I, I, I, I, I, I, I treat them the way I would love to be treated and, and I, I don't-
- HSHarry Stebbings
How, how is that then?
- NÖNiklas Östberg
I give a lot of trust. Um, I, I give them often the, the... I try to convince them. I'm not gonna overrule them. I'm gonna convince them that this is the right thing, and since they're all very smart, if you sit on the same data, they will come to the same conclusion. Or either I changed my view or they changed their view, but we always come to the same conclusion when we look at the same data. So, um, I think it's more about convincing and making sure that we're getting to the right understanding combined collectively that might take a little bit longer than if you're forceful and this is what needs to happen and, and gets done. So it takes longer, but in the end it, it's, it's moving faster. Once there's a clear buy-in, either I changed my mind or they changed their mind, it's, it's moving fast. I think the other is to making sure if we take in, in Oskar and many others, they, they, they're not only founders of Global, I, I see them as founders of Delivery Hero. They, they are part of, they're a big part of founding something that is, is the fundamental of Delivery Hero. So I think they're not only passionate about their own brand and entity, but, but over time they, they realize that they're actually part of driving a much larger organization, have a much larger impact together with other founders, and, and, uh, so, so I think we have built a, a very strong team where we take a lot of decisions together, and not only for, for Global, but Oskar takes a lot of decision for the rest of the group as well, and so does... And, and the, the other kind of key leaders of Delivery Hero.
- HSHarry Stebbings
Can I ask you, who did you try and convince but couldn't?
- NÖNiklas Östberg
I think there have been occasions when we have tried to, to, to make certain changes, and I think the biggest hesitation is the, the, the fear of losing control.So, um, applications, I think data has been clear that, uh, for example, we have to move tech to a common tech platform. So, we are running a global tech platform of- of... And it's clear that it's- it's outperforming anything else. Uh, so this is logistics, uh, tech stack, it's the vendor tech stack, it's the, uh, uh, warehouse management tools, picker applications, the payments, et cetera, et cetera. So, we have a tech backbone that is ex- ex- exceptionally good. But of course, once you get on there, you lose a little bit of control of the business that you're running. Because if you're running all of an entity and suddenly you have to rely on me running logistics for them, or me running vendor for them, of course they- they give up certain autonomy. Um, so- so- so there has been occasions when that control factor has been playing a role, and they've had certain hesitation of- of- of moving together. Um, I think over time, like, yeah, sometimes we- we, maybe we're not fast enough, um, and- and not good enough in convincing, and- and- and- and that had, in those cases, uh, been a lot of disruption later on. I think if you take the example of- of Turkey, I think there was a- a lot of hesitations on moving into a global tech stack, and we saw that there was a deterioration in development speed in- in the local platform. But I- I didn't want to force anything, and- and... But eventually, they- they just lost against competitors because it was not moving fast, and we had to make a full massive migration that took nine months because it- it... you had to move everything at once. That took a big hit on the business, and it took two years to fully recover from that. So, I think, okay, I've- I've also done my learnings where maybe we were not good enough in convincing about the- the- the power we- we can provide.
- HSHarry Stebbings
Do you see DoorDash, and do you see Uber Eats as your biggest competitors today? When you look at the capital that they have and the reserves that they have, is that the biggest threat?
- NÖNiklas Östberg
Not really. Coming back to the point around competition, I think it's 80% about what we deliver and maybe 20% what the competitor does. And every single time when I see here we haven't grown fast enough, it was not because of competition. It was because we didn't deliver a good service. We were not moving fast enough. So, I think it's 80% us and 20% competition. I don't think that- that the balance sheet matters, um, I don't know, in- in the end. That is not what limits any competitor to spend money. It's- it's gonna be the return that is gonna limit a competitor to spend money. So, it's gonna be hard for a DoorDash or Uber or- or someone to sustainably make bad investments, um, because they can. So, I- I don't think it's about balance sheet. They're all profitable entities. You can argue who is gonna move that profitability up faster or slower, but, uh, it's- it's not gonna be the balance sheet. It's probably more the- the at what cost can you have a good return?
- HSHarry Stebbings
Cans, we saw Getir scale inordinately, very quickly, and incredibly successful in Turkey, and then roll out across Europe, and then bluntly roll back with just the same speed. What did that teach you? What should we look at and learn from that?
- NÖNiklas Östberg
Yeah, that comes back to the thing, when you do something that's not sustainable and you get customers to order because they get- they get 20 bucks for free, um, of course you're not building a sustainable business. As soon as you pull that 20 bucks back, you- you're, you will lose a lot of customers. So, it- it's a very expensive way of growing. I think the same doing a lot of discount and vouchers, it can be good to do a discount for someone who's a good customer and getting them to try, but most customers who order with a discount, it's over-proportionally coming to very cost-sensitive customer. Customers are always looking for finding a deal. Uh, it always gonna drive, uh, a lot of fraud as well. So... Fake orders are similar. So, when you do too much of a voucher strategy, discount strategy, you're gonna attract a bad customer base. It's gonna be expensive, and it's gonna drive very little value. And I don't think Getir is the only one, right? Le- let's speak about our mistakes. If- if you take our Thailand business, we scaled from a couple of thousand orders a day up to 400,000 orders a day in less than a year. This is faster than I think I've seen anyone scale a business. But it was not sustainable. Uh, the business is now back to doing way less. It's doing e- e- eight... I don't know, it's 25% of that today or less maybe.
- HSHarry Stebbings
What- what- was- was that predicated on a heavy discounting strategy?
- NÖNiklas Östberg
Discount, yeah. You- you drove... It was very cheap to order food in- in Thailand, uh, with us. We didn't care for that customer experience enough. It was just about price. And of course when you- you try to move to sustainability, most of those orders will fall off, and I- I would say the value of our Thailand business is not very high. It's- it's... So, you can scale very fast in our business. You can grow to 400,000 daily orders in this case, but it's not worth anything unless you're being self-sustainable. So, when we see other competitors do that, we, uh, we- we- we really don't mind that much. We know what it does over time. Uh, we saw the same in- in Turkey. We saw the same in a few other places. Those customers come back to us as soon as they- they just stop giving the vouchers and discounts.
- HSHarry Stebbings
Was there a market you launched where it just didn't go up? Like, it was actually just pretty dead, reception wasn't great?
- NÖNiklas Östberg
Yeah. You, you, it's always hard in the beginning to get that product market fit and, and, and so on. And, uh, I, but, but I don't think it's about a market. I think every, uh, almost every market in the world would probably work with, with this. It's just a matter of getting that product market fit right. And secondly, is it worthwhile? Yeah. Is, is it worthwhile having another country, another set of regulation, another set of... So, so, um, a lot of markets might not make sense because it's not enough return, but I, I think they can all work.
- HSHarry Stebbings
How do you think about how long you're willing to lose money in a new market before it turns good?
- NÖNiklas Östberg
You need to see that the fundamental of the business works. Uh, coming back to that cohorts, are the cores good enough? Can we see a enough lifetime value in this? And can we see that the acquisition cost is getting to a place where we can actually scale it? So you, you need to get that to work maybe in a year or so. If you get it to work, then of course you're gonna spend money over the next couple of years because when you get it to work and you wanna scale it. If you don't get it to work, well, then it's not gonna cost a lot because why would you invest in a business that has a bad lifetime value return? So in the end, it, sometimes it could be that the best markets are the ones that's gonna cost a lot of money for a number of years because you want to invest to grow it. Uh, so it's not necessarily that the, the best market will be fastest to break even. It could be that the worst market are the fastest to break even, but then they never get any value.
- HSHarry Stebbings
How do you think about that, never get any value, with regards to emerging markets? One of the most important things I've learned is kind of pathways to liquidity. And actually, emerging markets, bluntly, are much more challenging to get liquidity from. There's just not much local liquidity. How do you think about that with emerging markets?
- NÖNiklas Östberg
Yes, I think, I, I don't think... I know for us, it's not such a big difference and we would rather see what, do we have a return when we invest in this customer regardless where they sit. Um, and in some markets, you can just scale it in a certain way. You cannot scale it fast. And coming back to the point what I, I tried to make before, you can make this business break even on a year, after a year or maybe two, uh, in a country. But then you're gonna not invest a lot of money and you're just gonna gradually scale it, I don't know, in a small percentage every year, and then you kind of run and break even for 10 years. Uh, and, and I did that during the, the early days. I, I was part of starting also OnlinePizza. It was a completely bootstrap, no investors at all. So we were break even almost on the first day of, of business. But of course, then it takes a very long time and you're not maximizing your business. If you have a good return on your customers, well, you wanna buy as many customers as you can at the price at which you have a good return. So, and, and that doesn't really matter where they sit. If they sit in, in, in developer markets, emerging markets, um, it'd be, for us, it would be, I don't know, no big difference.
- HSHarry Stebbings
Well, it does, doesn't it? 'Cause like ultimately, it all flows back to enterprise value of the entity. And actually, if people discount revenue from emerging markets, then that's gonna take a hit on the multiple that your enterprise value of that core entity is gonna be worth.
- NÖNiklas Östberg
Yeah, it depends a little bit. If you're, you're building a business to sell it, then, then of course you will have to look at the multiple and how markets evaluating and, and so on. If you're building a business because you wanna drive shareholder return over time and, and yeah, and driving cash flow and, and, and so on, then, then you might not care so much what investors think it's worth, uh, at a point in time. You would rather care for what is the value of the business that you're building. Uh, so I guess that's the difference between price and value. Um, and we, we try to be focused more on driving value than driving price.
- HSHarry Stebbings
Final one before we move on to Europe and then a quick fire. What's the single best M&A you've done from an ROI perspective?
- NÖNiklas Östberg
I think we have all of them because we bought them all very early. And I look at Apaducia from, from Latin what I mentioned before, there were maybe 50, 60,000 orders a month. Uh, that business will be huge. Look at Talabat, it was a little bit more expensive, but they were, they were really doing, yeah, 70, 80,000 monthly orders. And, and now that is a 10 billion business, so that is a hundred times return or so. Um, so, so we, we, we, we have a lot of hundred times returns or even a thousand times return, but most of them were small businesses. So of course there's a high return on a small amount. Then if you take a, a business like, like, like Global might have an absolute term, long-term equally large, but, uh, on a multiple basis, of course, it's less given that it was still a, a large acquisition.
- HSHarry Stebbings
Now, I, I have to touch on Europe
- 1:00:00 – 1:12:12
I think there are,…
- HSHarry Stebbings
before we do a quick fire. We both sit in Europe and the world has never been so convicted in their doom around the future of Europe. How do you feel when you look at the negativity and skepticism around Europe today?
- NÖNiklas Östberg
I think there are, there are, there's some fair bashing. There are things that we, we surely could have done better, and that I hope that we will do better. But in the end, I'm, I'm an entrepreneur, I'm an optimist. I, I, I believe we can do stuff. I believe we can build an amazing companies out of Europe. Um, and I think there's a lot of strength in Europe as well. Uh, so, so yeah, we are highly educated people, good infrastructure, welfare system, functioning democracy. We are a talent hub, uh, decent balance sheet and all of that. So there's a lot of strength of Europe. There are also a lot of weaknesses of Europe, and I, I, I hope we can address those. And if we can, I think Europe be an amazing place for, for, for startup and, and companies.
- HSHarry Stebbings
What would you most like to change? You can change three things.
- NÖNiklas Östberg
I think... Oh, three things. Europe. Um, yeah, make, make it easier, faster to get talent into Europe.... uh, reduce some of the, the, um, I don't know, uh, buro- bureaucracy or, or certain regulation that can sometimes be a little bit overwhelming for a lot of companies and we speak about GDPR, sustainability reporting, Pay Transparency Directive, Accessibility Act, uh, and then so on. And they all make sense and they have good intention, but in- collectively, it's just a, a big burden on, on, on those European companies. Uh, and, and I think a little bit unfairly that there are not the same criteria for, I don't know, other companies competing in Europe. So, I think this is proportionally adding to European companies. So, if you can, if you can do that, then, then that on a European level.
- HSHarry Stebbings
I mean, listen, I had Oscar on the show and he mentioned obviously the intense regulatory pressure that he's under from the Spanish government and it not being applied to, you know, blatantly, Uber and foreign competitors. To what extent is Europe regulating itself into oblivion?
- NÖNiklas Östberg
It's a big burden, especially on smaller companies, um, to deal with. I, I do think that sometimes we are harder on European companies and European companies are, are, are, th- there's more scrutiny on us. There's a lot of regulation that is circumvented or ignored by Chinese and, and US companies. Um, so I, I do think that we have to truly level the playing field, um, in, in many ways. And, um, yeah, I, I, I, I, I hope that happens. I think a lot of US players also leverage the dominance. I think DMA is, is an example of good regulation. Um, so we have to also make sure that it's enforced. Yeah. Yeah, we have to make sure the US and, and Chinese companies cannot circumvent regulation. Um, we have to make sure that we are not going after European companies more than US companies just because it's easier to, to approach us and, and reach us. So, there are a few things that I think that we have to also work on to making a level playing field, um, and hope that that will also happen.
- HSHarry Stebbings
What do you say to Oscar when he faces the pressure that he's under from a national and a government perspective? Is it like, "Hey, dude, I'm here for you. Call me." (laughs) Is it like, "Oh, shit. (laughs) That's a big fine." Like, what does one say?
- NÖNiklas Östberg
I think generally the principle of Delivery Hero is, is that we are in the details and, and we, we, yeah, we, we are in the ............................ in the details. So, I will not s- step there and, and just, I don't know, not be helpful and not knowing the details. I, I'll be in the details and the same thing, I expect Oscar to be in the details. And, uh, of course, we, we collectively try to find the best path forward and how we can solve it and be supportive and, and making sure we take the right decisions and, and, and operate in, in, in a good way. But in the end, we can only do so much. In the end, it's, it's, um, I, I, I, I cannot blame Oscar for, for challenges, uh, that he is not responsible for, um, that has affected him, but where we have collectively taken decisions that we think are right. Then, of course, we, we, we, we also take shared responsibility on those topics.
- HSHarry Stebbings
That was a tough question. Well done. (laughs) Uh, can I move into a quickfire round? So, I say a short statement, you give me your immediate thoughts. Does that sound okay?
- NÖNiklas Östberg
It's fantastic.
- HSHarry Stebbings
Amazing. What do you believe that most around you disbelieve?
- NÖNiklas Östberg
I think, you know, one thing, if you look, I think gen AI, gen AI or, or the largest beneficiary of AI is, is gonna be the average company deploying it, and not necessarily the, the, uh, Mag 7, uh, the ones who are building it. Uh, I think that is probably, um, contrarian in this, at least if you look at the stock market. We will see they have done tremendously well, but other companies haven't. So, I, I do believe that the biggest beneficiary is the company th- leveraging AI versus t- who's building.
- HSHarry Stebbings
Do you feel pressure as a public company CEO to have an AI story?
- NÖNiklas Östberg
No. But I feel pressure of making sure that we leverage AI to get more efficient. Yeah, we're working really hard on that. If you have a story or not, that's a little bit cosmetics. I, I don't care for that cosmetics so much. I care for actually leveraging and, and, and, and truly make our business better from it.
- HSHarry Stebbings
You can buy and hold one stock for the next 10 years, other than Delivery Hero. Which stock do you buy and hold?
- NÖNiklas Östberg
I, I like the philosophy of thinking 10 years and hold, um, because I think it, it sets the right direction of what are the companies that cannot be disrupted over 10 years. And I was always a big, I don't know, fan of Amazon and so on. I'm still a big fan of, of Amazon. But of course, the valuation of those companies have gone up a lot. So, you cannot count on margin expansion, uh, or, or multiple expansion. Sorry. Um, so, so the growth in those stocks will only be, or the value growth in those stocks would basically only be the growth that it can generate. That's still probably gonna be a fair amount. So, so maybe, yeah, maybe I stick with, um, with Amazon.
- HSHarry Stebbings
What would you do if you knew you couldn't fail?
- NÖNiklas Östberg
Increase risk.
- HSHarry Stebbings
How would you increase risk?
- NÖNiklas Östberg
You would double down even more on things that are uncertain. Uh, things that, uh, um, where the returns are higher.
- HSHarry Stebbings
What uncertain thing would you most like to double down on today?
- NÖNiklas Östberg
I think we're, we, we, we are a brave company that do what we believe in. So, I, I do not think that we're holding back too much. Of course, I mentioned before, we are big believers in the whole quick immerse, grocery shopping type of thing, uh, other verticals that we're expanding into as well, uh, health and beauty and, and so on. Um, I mentioned before, I think that's, that's easily more than 50% of our business long term. Today, it's only a small portion, a sm- a small fraction. So, that's something we are doubling down on. But, but, uh, um, yeah, may- maybe we... yeah, I, I, I, I don't think we are too afraid of lose or, or taking a risk. Um, we are, we are willing to take risks as long as we have good data behind it.
- HSHarry Stebbings
Which other public company CEO do you most respect and admire, and why them?
- NÖNiklas Östberg
There, there are many. Um, you have a Mark Zuckerberg and, um, for having the bravery that, that he has, uh, had over the years. He's been criticized many times, but he stood by his, his beliefs. Uh, Jensen, of course, with, with NVIDIA, he's been taking bold decision and being, being right, uh, many times. Um, so, so I'm, I'm ... May- maybe I will say him, uh, for, for his courage and, and, yeah, and, and resilience.
- HSHarry Stebbings
When will drones take over deliveries?
- NÖNiklas Östberg
It already reached a point where you can actually make it work economically. And, uh, in some places, regulation is also a part of it. It will take time to scale it, uh, but I, I think over time, around 25% of deliveries could be done by, by drones. But it might be 10 years, something, to actually build out that network, uh, to be there. So we are, we are moving in that direction, but it's gonna take a long time. I will say robotics will be faster, so, um, and probably be able to cover a larger portion of, of, of business. So that could cover the-
- HSHarry Stebbings
What do you mean it'll be able to cover a larger portion? It does pick and pack or it does delivery? What is that? Where do they own that segment?
- NÖNiklas Östberg
Yeah, so, so of course, the challenge with, uh, uh, drones is that it, it's hard to do in the city center of cities because of noise and regulation and a place to land on, on, and take off from. So it's a little bit harder to do that in city centers and so on, and, uh, while, uh, the r- robotics, uh, you can do in, in small cities, big cities, city centers, you can do it everywhere. It's a little bit slower than drones, so if you look at an average drone delivery, it's happening in, like, three minutes, uh, plus, uh, loading, off-loading. Um, robots have, I don't know, they cannot do the shortest way. They have to actually take the, the road, they have to wait for stop sign, and so on, and they cannot drive in the same pace as you have a, a drone. So they are slower, but they can, they can get you almost anywhere. That would probably be large much faster than, than, than drones.
- HSHarry Stebbings
Does money make you happy?
- NÖNiklas Östberg
No, I've, I've, I've never been thinking about it. I, I think having purpose and being in a team, having, I don't know, a shared experience, that, that makes me happy. I've, I've never been thinking about it, really. It's, it's never been a ...
Episode duration: 1:12:12
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